ANNUAL REPORT NORTH ISLAND CONSUMER SERVICES CO-OPERATIVE

Transcription

1 ANNUAL REPORT 2018 NORTH ISLAND CONSUMER SERVICES CO-OPERATIVE

2 Campbell River Office: 980 Alder Street, Campbell River, BC V9W 2P9 Tel: Fax: Toll Free: Courtenay Office: # Cliffe Avenue, Courtenay, BC V9N 2K4 Tel: Fax:

3 Balance Sheet As at March 31, 2018 Current assets Cash and cash equivalents $ 136,355 $ 104,301 FCL special deposit (Note 4 (a)) 167, ,162 Accounts receivable - Customer (Note 6) 35,857 34,123 - Other Income taxes recoverable 17,821 19,410 Inventories (Note 2) 105, ,019 Prepaid expenses - 6, , ,582 Investments Federated Co-operatives Limited (Note 4(b)) 638, ,301 Vancouver Island Central Services Co-operative (Note 5) 107, ,703 Other organizations, at cost 1,936 2,376 Property, plant and equipment (Note 7) 652, ,601 Total assets $ 1,863,453 $ 1,822,563 Current liabilities Accounts payable and trust liabilities (Note 8) $ 256,508 $ 224,104 Total liabilities 256, ,104 Members' equity Share capital (Note 9) 627, ,777 Reserves and retained savings (Note 10) 979, ,682 1,606,945 1,598,459 Total liabilities and members' equity $ 1,863,453 $ 1,822,563 Subsequent events (Note 16) Approved on behalf of the Board of Directors Director Director The accompanying notes are an integral part of these financial statements 1

4 Statement of Net Savings and Statement of Retained Savings March % July % Sales (Note 11) $ 2,546, $ 3,203, Cost of goods sold 2,325, ,912, Gross margin 220, , Expenses Operating and administration 338, , Net interest (Note 12) (3,678) (0.1) (3,865) (0.1) 334, , Loss from operations (114,261) (4.5) (128,449) (4.0) Patronage refunds 136, , Savings (loss) before income taxes 21, (52) - Income taxes (income tax recovery) (Note 14) 2, (181) - Net savings $ 19, $ Retained savings, beginning of year $ - $ - Net savings 19, Transfer to general reserve (Note 10) (19,254) (129) Retained savings, end of year (Note 10) $ - $ - The accompanying notes are an integral part of these financial statements 2

5 Statement of Cash Flows Operating activities Net savings $ 19,254 $ 129 Adjustments for: Depreciation 11,390 17,026 FCL patronage refund (133,907) (125,108) VICSCA patronage refund (2,167) (3,289) Changes in non-cash operating working capital: Accounts receivable (1,610) (10,361) Income tax recoverable 1,589 (3,121) Inventories 5,277 (2,658) Prepaid expenses 6, Accounts payable and trust liabilities 32,404 52,040 Cash used for operating activities (61,327) (75,282) Investing activities Redemption of FCL shares 108, ,844 Redemption of VICSCA shares 1,950 2,960 Additions to property, plant and equipment (6,262) (651) Investment in other organization 440 (1) Cash provided by investing activities 104, ,152 Financing activities Share capital issued 1,620 1,440 Redemption of share capital (12,388) (16,823) Cash used for financing activities (10,768) (15,383) Net increase in cash and cash equivalents 32,054 24,487 Cash and cash equivalents, beginning of year 271, ,976 Cash and cash equivalents, end of year $ 303,517 $ 271,463 Cash and cash equivalents are comprised of: Cash and cash equivalents $ 136,355 $ 104,301 FCL special deposit 167, ,162 $ 303,517 $ 271,463 The accompanying notes are an integral part of these financial statements 3

6 Notes to the Financial Statements 1. Incorporation and operations North Island Consumer Services Co-operative ("the Co-operative") was incorporated under the Cooperatives Act of British Columbia on July 27, The primary business of the Co-operative is operating a retail petroleum outlet in Campbell River, British Columbia. 2. Significant accounting policies These financial statements have been prepared by management in accordance with Canadian accounting standards for private enterprises. A precise determination of many assets and liabilities is dependent upon future events and consequently, the preparation of these financial statements involves the use of estimates and approximations. Areas subject to estimation include valuation of accounts receivable, inventory, useful life of property and equipment and accrued liabilities. These estimates also affect the disclosure of contingencies at the date of the financial statements and the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. These financial statements have been prepared to reflect the following significant accounting policies: (a) Definition of financial year The Co-operative's financial year ends on March 31, It is a deemed year end due to the amalgamation with Peninsula Consumer Services Co-operative. See Note 16 for further information. (b) Cash and cash equivalents Cash and cash equivalents are defined as cash and investments with an initial maturity of less than three months. (c) Inventories Inventories are valued using first-in first-out method and the retail method. Inventories are stated at the lower of cost and net realizable value. The Co-operative estimates net realizable value as the amount that inventories are expected to be sold for, taking into consideration fluctuations of retail price due to seasonality less estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is determined to be not recoverable due to obsolescence, damage or permanent declines in selling prices Confectionary $ 8,661 $ 10,009 Cigarettes 32,903 30,386 Lottery 5,622 5,402 Oil & grease 2,592 3,541 Propane 1,558 1,458 Petroleum 54,406 60,223 (d) Investments $ 105,742 $ 111,019 The Co-operative's investments are accounted for using the cost method. Accordingly, the investments are recorded at acquisition cost, less any provisions for permanent impairment or adjustments for patronage refunds or share redemptions. All transactions with FCL are disclosed in a separate note (Note 4). All transactions with VICSCA are disclosed in a separate note (Note 5). 4

7 Notes to the Financial Statements (e) Financial instruments Financial instruments are recorded at fair value on initial recognition and are subsequently recorded at amortized cost, unless management has elected to carry the instruments at fair value. The Co-operative has not elected to carry any such financial instruments at fair value. Financial instruments are adjusted by transaction costs incurred on acquisition and financing costs, which are subsequently measured at amortized cost. Financial assets are assessed for impairment on an annual basis at the end of the fiscal year if there are indicators of impairment. If there is an indicator of impairment, the Co-operative determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset. If there is a significant adverse change in the expected cash flows, the carrying value of the financial asset is reduced to the highest of the present value of the expected cash flows, the amount that could be realized from selling the financial asset or the amount the Co-operative could realize by exercising its right to any collateral. If events and circumstances reverse in a future period, an impairment loss will be reversed to the extent of the improvement, not exceeding the initial carrying value. (f) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is taken over the estimated useful lives of the assets using the following methods and rates: Buildings Declining balance 4% Pavement Declining balance 8% Tanks Declining balance 10% Furniture & equipment Declining balance 20% Computer equipment Declining balance 55% In the year of acquisition, depreciation is taken at half the annual rate. Expenditures for maintenance and repairs are charged to operating expenses as incurred. Significant expenditures for improvements are capitalized. Gains or losses realized on the disposal of property, plant and equipment are reflected in operations in the year of disposition. Claims for assistance under various FCL programs are recorded as a reduction of the cost of related assets in the period in which eligible expenditures are incurred, with any depreciation calculated on the net amount. An impairment loss is recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. No such impairment loss was recorded during the year. (g) Share capital The Co-operative approves an allocation to members subsequent to year end. The amount is recorded as an addition to share capital and a reduction in retained savings. The Co-operative records the redemption of shares that is to be paid to its members at the time it has been approved by the Board of Directors. (h) Revenue recognition The Co-operative recognizes revenue when evidence of an arrangement exists, delivery or change of ownership has occurred, and the price to the buyer is determined. 5

8 Notes to the Financial Statements (i) Income taxes The Co-operative follows the taxes payable method whereby only current income tax assets and liabilities are recognized to the extent they remain unpaid or are recoverable. In addition, the benefit relating to a tax loss incurred in the current period and carried back to prior periods is recognized as a current asset. Current income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to apply when the tax liabilities or assets are to be either settled or realized. 3. Financial instruments and risk management The significant financial risks to which the Co-operative is exposed are credit risk and interest rate risk. (a) Credit risk The Co-operative is exposed to credit risk on the accounts receivable from its customers. The Co-operative manages the credit risk through an active credit management program. Three customers account for 43.69% ( Two customers account for %) of the account receivable balance. (b) Interest rate risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. The Co-operative's sensitivity to fluctuations in interest rates is limited to its cash, funds on deposit and debt. The Co-operative manages its exposure to interest rate risk through floating rate deposits and borrowings. 4. Transactions with Federated Co-operatives Limited (FCL) (a) FCL special deposit Amounts held with FCL as special deposits earn interest at rates based on prime rates. (b) Patronage refund The Co-operative, along with other Co-operatives in Western Canada, own FCL. At the end of each year, FCL divides a substantial portion of its net savings among these retail Co-operatives in proportion to the business done by each with FCL. During FCL's fiscal year ended October , the Co-operative purchased goods amounting to $2,154,934 ( $1,955,107) from FCL in the normal course of operations. These purchases resulted in a patronage refund from FCL which was received as non-cash consideration in the form of additional shares in FCL. FCL, based on its available cash flow, redeemed an amount of FCL shares held by the Co-operative. The amounts of the patronage refund and shares redeemed are as follows: Opening investment balance $ 612,301 $ 600,037 Patronage refund 133, ,108 Share redemptions (108,021) (112,844) Closing investment balance $ 638,187 $ 612,301 6

9 Notes to the Financial Statements (c) Asset retirement obligation The Co-operative participates in a contaminated site management program established by FCL to manage its asset retirement obligations. This program limits the Co-operative s liability to $25,000 per site as long as the Co-operative continues to exercise due diligence. The Co-operative has one site under this program. Management believes that due diligence has been exercised and that the impact of the asset retirement obligation to the Co-operative's financial statements is not significant. (d) Petroleum purchase commitment Under the terms of the agreement with FCL, the Co-operative has committed to purchase petroleum products, at market price, from FCL for its gas bar over a ten year period commencing from November 15, Failure to meet this commitment would require the Co-operative to pay immediately outstanding gas bar and cardlock loan balances owed to FCL plus repay any gas bar grants received plus interest on the grants compounded annually at 10% from the grant date. Total grants received over the previous ten year period amounted to approximately $95,000 ( $95,000). Management intends to fulfill all existing contracts with FCL. 5. Investment in Vancouver Island Central Services Co-operative Association (VICSCA) North Island Consumer Services Co-operative, along with other Co-operatives on Vancouver Island, own VICSCA. At the end of December in each year, VICSCA divides substantially the total of its net savings among these retail Co-operatives in proportion to the business done by each with VICSCA. In 2018, North Island Consumer Services Co-operative purchased goods amounting to $50,841 ( $74,143) from VICSCA in the normal course of operations. These purchases resulted in a patronage refund from VICSCA which was received as non-cash consideration in the form of additional shares in VICSCA. VICSCA based on its available cash flow, redeemed an amount of VICSCA shares held by the Co-operative. The amounts of the patronage refund and shares redeemed are as follows: Opening investment balance $ 107,703 $ 107,374 Patronage refund 2,167 3,289 Share redemptions (1,950) (2,960) Closing investment balance $ 107,920 $ 107, Accounts receivable - customer Shown net of an allowance for doubtful accounts of $0 ( $1,000). 7. Property, plant and equipment Original Cost Accumulated Depreciation March Book Value July Book Value Land $ 536,495 $ - $ 536,495 $ 536,495 Buildings 105,784 60,673 45,111 46,506 Pavement 75,916 62,085 13,831 14,714 Tanks 90,472 79,313 11,159 12,064 Furniture & equipment 262, ,986 40,945 47,212 Computer equipment 30,247 25,315 4, $ 1,101,845 $ 449,372 $ 652,473 $ 657,601 Depreciation for the current year included in operating and administration expense was $11,390 ( $17,026). 7

10 Notes to the Financial Statements 8. Accounts payable and trust liabilities FCL payables $ 220,990 $ 192,105 Other payables 30,279 29,907 Trust liabilities: Payroll deductions 3,837 - Goods and services tax 1,286 1,937 Provincial sales tax Share capital $ 256,508 $ 224,104 Authorized, $1 Balance, beginning of year $ 636,777 $ 651,102 Cash from new members 1,620 1,440 Shares transferred from reserves 1,803 1, , ,600 Withdrawals and retirements 12,388 16,823 12,388 16,823 Balance, end of year $ 627,812 $ 636, Reserves and retained savings General Retained Reserve Savings (Deficit) Balance, beginning of year $ 961,682 $ - $ 961,682 $ 962,611 Net savings distributed to retained savings - 19,254 19, Patronage allocation Shares transferred (1,803) 1,803 (1,803) (1,058) Reserve transfers 19,254 (19,254) - - Balance, end of year $ 979,133 $ 1,803 $ 979,133 $ 961, Sales The Co-operative's business operations consist of one segment, which is the gas bar. All sales are to external customers. 8

11 Notes to the Financial Statements 12. Net interest Interest expense on - short term debt $ 26 $ 37 Interest revenue (3,704) (3,902) 13. Pension plan $ (3,678) $ (3,865) The Co-operative participates in a multi-employer defined contribution plan whereby the Co-operative and participating employees contribute equal amounts up to the maximum allowed under the Income Tax Act. The Co-operative has no unfunded liability under this plan. During the year, the Co-operative recorded $2,332 ( $2,803) of expense relating to the plan. There were no significant changes to the rate of employer contributions during the year. 14. Income taxes The Co-operative accounts for income taxes using the taxes payable method. As a result, the Co-operative's income tax expense varies from the amount that would otherwise result from the application of the statutory income tax rates as set out below: Net savings (loss) before income taxes $ 21,814 $ (52) Expected income tax expense (recovery) at the combined tax rate of 12.4% ( %) net 2,697 (7) of the small business deduction Income or expenses claimed in different periods for income tax purposes: Capital cost allowance in excess of depreciation (137) (174) Income tax expense (recovery) $ 2,560 $ (181) 15. Comparative figures Certain comparative figures have been reclassified to conform to current year financial statement presentation. This did not affect prior year earnings. 16. Subsequent events Peninsula Consumer Services Co-operative amalgamation North Island Consumer Services Co-operative amalgamated with Peninsula Consumer Services Cooperative on April 1, The financial effect of this amalgamation cannot be estimated at this time. 9

12 Unaudited Statistical Information Record of Sales and Savings Net Year Sales Savings (Loss) (1) % From Date of Incorporation, July 27, 1972 to March 31, $ 212,979,902 $ 2,483, ,353, , ,488,923 71, ,955,269 69, ,795,857 (75,026) (2.7) ,987,450 79, ,184,165 42, ,381,446 11, ,427,844 24, ,203, ,546,503 19, $ 244,304,176 $ 2,929, (1) 2010 and prior years - savings (loss) is before income taxes and patronage refund to members. Membership Members purchasing during the year 1,971 Inactive members 1,076 Total members 3,047 10

13 Directors and Officers Year Term Position Name Address Expires President Comeau, Joan Campbell River, B.C Vice-President Egan, Francois Campbell River, B.C Secretary Cooley, Steve Campbell River, B.C Director Nash, Lynn Campbell River, B.C Director Dumont, Linda Campbell River, B.C Director Sego, Darcy Campbell River, B.C Director Flinn, Doris Campbell River, B.C